ADP Mining Company mines an iron ore caled Aloha During the month of August 400

Question

ADP Mining Company mines an iron ore caled Aloha During the month of August 400 00 tons of AIpha Company mines an iron ore called Alpha. During the month of August, 400,000 tons of Alpha were mined and processed at a cost of $742,500. As the Alpha ore is mined, it is processed into Delta and Pi, where 60% of the Alpha output becomes Delta and 40% becomes Pi. Each product can be sold as is or processed into the refined products Super Delta and Precision Pi. Selling prices for these products are: Delta Super Delta Pi Precision Pi Selling price 7/ton $15/ton $12/ton $24/ton Processing costs to refine Delta into Super Delta are $2,400,000; processing costs to refine Pi into Precision Pi are $1,600,000. Required a-1 What would be the incremental profit or loss per unit if Delta is refined into Super Delta? Incremental profit or loss per unit f Pi i efined into Precision P a-2 What would be the incremental profit or loss per unit if Pi is refined into Precision Pi? Incremental

Explanation / Answer

Particulars Total Delta Super delta PI Precision PI Total tonnes of Alpha 400000 240000 160000 Cost of minning 742500 445500 297000 Sale Perice 1680000 1920000 Profit/ Loss 1234500 1623000 IF Further Processed Delta to Super Delta Cost of Transforming from Delta to Super Delta 2400000 Add: Cost of Delta 445500 Total Cost 2845500 Sale price 3600000 Profit/ Loss 754500 Incremental Loss 480000 Hence further processing not recommended IF Further Processed PI to Precision PI Cost of Transforming from PI to Precision PI 1600000 Add: Cost of PI 297000 Total Cost 1897000 Sale price 3840000 Profit/ Loss 1943000 Incremental profit 320000 Hence further processing is recommended All the data given is relavant Maximum Profit =1943000+1234500 = 3177500

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